By TIOL News Service

NEW DELHI, MAR 31, 2016: THE appellant filed a Bill of Entry through its CHA for the goods declared as "IS 1000 fibre-optic endoscope surgical system" [CTH9018.90] and claimed the benefit of concessional rate of duty under serial No. 363 (A) - List 37 -Item No. 82 of Notification No. 21/2002-Cus, dated 01.03.2002 which covered various specific types of endoscopes. For accessories, concessional rate of 5% was claimed under Serial No. 363 (B) - List 37 - Item No. 82.

The adjudicating authority passed the following order :

(i) The correct description of the goods imported under Bill of Entry would be treated as "IS 1000 da vinci Surgical System" and not as "Fibre Optic Endoscope" as claimed.

(ii) The Bill of Entry assessed provisionally was assessed finally at normal rate of customs duty @ 25% + 16% + 4% (effective 50.8%) and the benefit concessional rate of duty claimed under Notification No.21/2002-Cus - S.No.363(A) was denied.

(iii) The differential amount of duty of Rs.3,47,63,531/- was ordered to be recovered along with interest thereon u/s 28ABof CA, 1962.

(iv) Confiscation of the impugned goods was ordered and an option was given to redeem the same on payment of fine of Rs.75 lakhs.

(v) Equivalent Penalty of Rs.3,47,63,531/- was imposed u/s 114A ibid on the appellant importer.

(vi) Penalty of Rs.3 lakhs u/s 112(a) was imposed on Dy. General Manager (Medical Materials).

(vii) Penalty of Rs.5 lakhs u/s 112(a) was imposed on the indenting agent & a penalty of Rs.1 lakhs on the CHA.

Before the CESTAT, the appellant fairly conceded that as regards the demand of duty and confiscation of goods the issue has been settled against them by the decision in Care Foundation = 2014-TIOL-537-HC-DEL-CUS .However, they contended that no interest was recoverable because the demand was not raised/confirmed u/s 28 ibid, adding that even if the impugned order is taken to be issued in the context of finalisation of the provisional assessment u/s 18, no interest can be demanded as the provision for interest liability was introduced on 13.07.2006 only. Reliance is placed on the decision in Goyal Traders = 2011-TIOL-568-HC-AHM-CUS . The indenting agent pleaded that the penalty be reduced as concluded in the case of Care Foundation (supra). The CHA argued that they had no role in the mis-declaration of the impugned goods and had faithfully prepared and submitted the documents to Customs based upon the documents it received from the appellant; had enclosed the invoice which showed the description of the goods as given by the supplier.

The AR supported the order of the adjudicating authority.

The Bench after considering the submissions found merit in the submissions made by the appellants and the case laws cited and, therefore, observed -

+ It is evident from perusal of para 47 of the SCNthat the same was for the finalisation of assessment of Bill of Entry which had been assessed provisionally.

+ The Show Cause Notice does not mention Section 28 of the Customs Act, 1962 even in passing. The Show Cause Notice also does not mention as to under what provisions of law, the interest was sought to be recovered although the impugned order confirms interest under provisions of Section 28AB ibid.

+ Perusal of Section 28 AB ibid as it existed during the relevant period leaves no scope for ambiguity that the interest thereunder is chargeable only when the demand has been confirmed under provisions of section 28 ibid.

+ Even if it is considered that the demand arises out of finalisation of provisional assessment in terms of Section 18 ibid, it has been settled by judicial pronouncements that no interest is recoverable on finalisation of provisional assessments made prior to 13.07.2006 when the provision for interest liability were introduced in Section 18 ibid by inserting Section 18 (3) even if the finalisation of assessment took place after 13.07.2006.

+ The wording of Section 114A ibid makes it expressly clear that penalty under that Section is attracted when liability to pay duty or interest is determined under Section 28 ibid. Thus in the facts and circumstances of the present case, penalty under the section 114 A ibid is simply not attracted.

+ As the facts and circumstances of the present case are similar to those obtaining in the case of M/s. Care Foundation , the penalty imposed on the indenting agent is reduced in the same ratio to Rs.1 lakh.

+ It is clearly brought out in the impugned order that he (Dy. General Manager (Medical Materials)) was the one looking after the import of the said equipment and that he was having knowledge of the mis-declaration and was a part of the entire plan to mis-declare the impugned goods. Thus, penalty on him is attracted. But in the given circumstances and having regard to the fact that penalty on M/s. J. Mitra& Bros, (indenting agent) has been reduced from Rs.5 lakhs to Rs.1 lakh,same principle is followed in this case also.

+ As regards the penalty on the CHA, ( M/s Elecon Cargo Pvt. Ltd .) we find that it filed a Bill of Entry on the basis of the documents made available to it by the importer and it had duly enclosed the supplier' s invoice which described the goods as "Endoscopic Intuitive IS 1000 da Vinci Surgical System". There is nothing on record to show that the CHA was deliberately trying to mislead Customs or was having any mala fide. The very fact that the relevant invoice was duly enclosed along with the Bill of Entry submitted to Customs is indicative enough that it was not the intention of the CHA in any way to hoodwink Customs . Thus, penalty on the CHA is not attracted.

The appeals were partly allowed.

(See 2016-TIOL-761-CESTAT-DEL)